Malloy Lends His Support to Social Enterprise
Vishal Patel and Onyeka Obiocha were forced to incorporate their lifestyle coffee company, A Happy Life, as an LLC last March, but they would like to be able to switch corporate structures and become a Benefit Corporation.
A Happy Life is a social enterprise. Its coffee comes from underserved countries like Bolivia, Costa Rica, and Tanzania and all of the profits from the sale of the coffee go back to coffee growers in these communities.
“It’s a win-win,” Patel said. “The customer can get a product that reminds them to be happy every day and whatever profits we’re making goes back to these communities and puts a smile on their face.”
There’s no tax benefit, per se, based on switching designations from an LLC to a “b-corp,” but at the moment “b-corps” don’t exist in Connecticut. They do exist, however, in 19 other states and Washington, D.C.
Patel and Onyeka were just two of the dozens of entrepreneurs at the reSET co-working space in Hartford who urged lawmakers and Gov. Dannel P. Malloy on Tuesday to allow for the new “b-corp” designation.
However, there was no real arm-twisting involved. Malloy and Lt. Gov. Nancy Wyman attended a press conference at the reSET offices to let them know they support the concept.
Similar legislation failed last year, but Malloy said he’s going to work hard to get it passed as quickly as possible when the session opens Feb. 5.
“We are both big believers in this undertaking,” Malloy said. “. . . It holds the business accountable for creating a public benefit. It ensures transparency through reporting to shareholders and the public and it allows b-corps to preserve their social mission through any changes in corporate ownership.”
Similar legislation that would have allowed the “b-corp” designation passed the House last year 128-12, but was never raised by the Senate. Malloy said that not having this type of designation for social enterprises puts Connecticut at a competitive disadvantage since the designation is available in nearby states like New York and Massachusetts.
“This is part of our legislative work list, wish list,” Malloy said.
Malloy said he didn’t have an “definitive answer” as to why it failed in 2013, but expressed confidence it would pass in 2014.
Kate Emery, CEO of reSET, said there is no tax advantage to being a social enterprise.
“I think that’s a purposeful decision,” Emery said. “We’re looking at people who are going into this to make a difference, not in order to get a tax break.”
However, Emery pointed out that these corporations are creating jobs and therefore creating taxable revenues.
There also are other measures each company must meet in order to fulfill their social mission. For example, the Firebox Restaurant in Hartford, which is managed by a trust, could measure its success by the number of jobs it’s creating in the neighborhood. There’s another business at reSET, which Emery says is taking produce to neighborhoods who don’t have access to fresh produce, and their success could be measured by the amount of produce they are providing.
The measurements these companies must meet will depend upon the social problem they decide to help solve.
The legislature’s Democratic majority announced support for the legislation earlier in the day during a press conference on jobs legislation.
Tags: connecticut, benefit corporation, b-corp, business classification, social enterprise trust, social value, Malloy, Wyman, reSET, dh
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